“It’s the end of an era for storage,” declared Wikibon Analyst Stu Miniman (@stu, right), summing up the symbolic impact of Dell Inc.’s planned acquisition of storage giant EMC. As a former EMCer himself, Miniman has some special insight on what made that company great and how the combined companies can leverage their assets to accelerate the business rather than wind it down.

Many people classify EMC as a storage company, but it long ago broadened into the role of a diversified infrastructure supplier. Pointing to EMC’s strength in converged infrastructure with its VCE division, opportunities with hyper-convergence both with VCE and VMware Inc., plus Federation assets Pivotal Software Inc. and RSA Security LLC, Miniman said the company’s philosophy is “What’s important is not storing data, it’s getting leverage out of data.”

That mission served the company well as storage became a brutally competitive market in recent years. Western Digital’s $19 billion purchase of SanDisk this week is further evidence of the consolidation that competition is now driving. Miniman would add another big new storage player to mix: Amazon Web Services. “It’s easily a $1 billion to $2 billion storage company, yet it’s not a direct competitor to EMC,” he said.

EMC’s growth challenge has been exacerbated by customers’ shift from infrastructure to application centricity, Miniman said. Enterprises care less and less about equipment and more about factors like availability, performance and cost. That hasn’t been good for EMC. “If you compete head-on with EMC on storage, it will beat you. But where EMC is at risk is when companies adopt services that deliver the storage inherently,” he said. “One of the most attractive parts of the deal for EMC is that, as a private company, EMC can manage some challenging transitions in product lines and margin without the constant critcism of Wall St.,” says Miniman.

The Dell-EMC combination will easily grow the companies’ storage footprint. EMC has long been the leader in Gartner’s storage Magic Quadrant, and this year Dell moved higher in the rankings. “There’s some stuff that overlaps and that’s fine,” Miniman said.

There are also synergistic opportunities in hyper-converged platforms with VCE and Dell. EMC has ScaleIO software (and VMware VSAN) and Dell has compute platforms. VCE’s VxRack currently runs on hardware from Quanta Computer lnc. But “It now makes more sense to put stuff on the Dell platform than Quanta,” Miniman said.

With EMC already selling a lot of computing power, Dell is a natural platform to sell to current customers. The two companies had a partnership for 10 years that Dell ended in 2011, even though the deal was lucrative for both companies, with EMC reportedly earning nearly 10 percent of its annual revenue from selling Dell servers and Dell deriving nearly half of its storage revenue from the sale of EMC equipment. “As EMC moves to selling more x86 hardware, most of that will now come from Dell,” Miniman said.

The VMware factor

One of the big questions overhanging the marriage is the future of EMCs VMware subsidiary. On that point, Miniman is resolute. “They’re not going to do anything to mess up VMware today,” he said. “That’s one of the things Dell wants out of this deal. VMware is strategic to Dell.” And without the pressure from Elliott Management Corp. to divest its VMware holdings, Dell can make its own decisions.

So is this a good marriage?

“EMC has a broad product line and Dell knows how to sell on low margins,” Miniman said. “Dell is leaner but EMC is more aggressive. The question is whether we get the best of both sides – innovation at lower prices – or the worst – higher prices and fewer new features.

“Dell has said this deal is more about opportunities than cost savings,” he said. “What they haven’t said is what those opportunities are.”

The questions Miniman wants to see answered over next six months are:

• What are the benefits for customers?
• How will the deal affect relationships with channel partners? “The channel is scared. EMC does reasonably well with the channel, but Dell has not had a good track record,” Miniman said.
• What’s the future of the VCE? “There is some trepidation that this deal could undercut the channel and threaten the relationship with Cisco,” which is EMC’s partner on VCE, Miniman said. “We estimate 20 percent of [Cisco Unified Computing System] sales go through the VCE partnership. Cisco and EMC are married on that stuff. That being said, Cisco is partnering with everyone. “
• Who’s next? “We expect to see more consolidation in the storage area.”

An interesting side note is that Howard Elias (left), president and chief operating officer of EMC Global Enterprise Services, has been named as one of the two lead executives for the integration process. Elias was senior vice president and general manager of Compaq Computer Corp.’s Business Critical Server Group when the company acquired Digital Equipment Corp. in 1998. He later went through Compaq’s subsequent acquisition by Hewlett-Packard Co., a deal that the son of one of HP’s founders called a “$25 billion mistake.” Elias certainly knows how difficult acquisitions can be.

Below: Dell Chief Commercial Officer and Enterprise Solutions President Marius Haas stopped by theCUBE and chatted with John Furrier and Dave Vellante about the management team that Dell has acquired. He provided insight into the entrepreneurial mindset that Michael Dell has established and what customers are looking for.

Image by Olessya via Pixabay